DALLAS – Many would-be homebuyers have been put off by rising prices.
As the price of a home has increased, so has the amount of cash you’ll need if you’re trying to make a 20% down payment.
And if you get certain types of mortgage loans and can’t make that 20% down payment, your lender may require you to purchase additional private mortgage insurance – potentially making your monthly mortgage payment higher than you can afford.
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And then there is the “NACA mortgage”
There is an alternative known as the “NACA mortgage.” It may seem crazy, but I checked off some of this mortgage product’s features with NACA, the Neighborhood Assistance Corporation of America, to confirm them: No down payment, no closing costs, no PMI (private mortgage insurance), no lender fees or points, and a fixed interest rate that’s below market – and no credit score requirement.
Before we get into it any further, and before you can even say what you might already be thinking, the NACA director with whom I discussed all the details of the mortgage program said, “It sounds too good to be true.”
It does. The person from NACA who said it was Bruce Marks, who is now CEO of NACA. Before this role, he explains, “I was a regulator. I worked at the Federal Reserve Bank of New York. So, you know, I learned from the inside.”
Marks said he learned how to make homeownership a reality for more people. He boasts that NACA is now the largest HUD-approved consulting organization in the country.
How do they do that?
With major banking partners and $20 billion in support, Marks said NACA has helped many people who thought they couldn’t get a mortgage or afford to take out a mortgage – and be able to afford it.
“We have over 80,000 mortgages,” he said.
This is national. So what’s here in Texas?
“I would say it’s in the top three,” he said. “Texas is one of our largest markets. We have offices in Houston, Dallas and San Antonio and have closed thousands upon thousands of mortgages in Texas.”
How do they do that? How do the banks do it? And how can a borrower participate? NACA is not the lender. It advises and qualifies borrowers, while the banks involved provide the mortgages.
For example, NACA is touting a major partnership with Bank of America. Bank of America states that it has “partnered with NACA for nearly 30 years, providing mortgages to individuals and families with no down payment and no closing costs (paid by Bank of America) at below-market fixed interest rates. This partnership has made affordable homeownership possible for thousands of homeowners.”
A bank continues to earn interest on these loans even if it charges a lower interest rate. This partnership can also help a bank reach more low- and moderate-income customers, which can also help the bank show federal regulators that it is meeting the lending needs of these communities.
Additionally, NACA stated that foreclosure rates among its borrowers have historically been exceptionally low, which is important to lenders.
What’s special about NACA mortgages is that they don’t require private mortgage insurance (PMI), even if there’s no down payment.
NACA also does not require borrowers to meet a minimum credit score. Instead, an intensive qualification process is used that closely examines the borrower’s savings, employment and income stability, rent and utility payment history, and ability to handle a future mortgage payment. And it offers home buyer advice.
“For every loan we take out, the bank pays us a fee,” Marks explained.
NACA also requires NACA members (people who participate in their program) to pay a small annual fee. And the organization says, “NACA’s consulting affiliate receives HUD consulting funds, which cover a small portion of consulting costs.”
Here’s how it works for borrowers
A borrower must meet the income requirements to receive the best conditions as a “Priority Member”.
“Low- to moderate-income members (i.e., borrowers and co-borrowers) whose combined income is at or below the median family income of the MSA in which they are purchasing a home” may qualify as a priority member.
In Dallas County, the median income, which serves as the cutoff point, is $121,100. You can check your median income in the Metropolitan Statistical Area (MSA) here.
Marks explains that the program also requires that “you complete a three to four hour workshop. You then upload your information and documents through our system, through the NACA portal.”
An advisor will go over your finances. You must provide financial information so that it can be verified by NACA. If you look here (under the heading “What documents do I need to be NACA qualified?”) you will see the list of required documents. This includes, for example, pay stubs for the last 30 days, tax returns (for the last 2 years), W-2 returns (for the last 2 years), and bank statements for all accounts (for the last 3 months).
What’s the catch?
According to NACA, there is no catch. However, potential members should be aware that counseling and qualification through NACA is mandatory and that the qualification process is document intensive.
Additionally, NACA began as an aggressive advocacy and activism organization to “combat lenders who engage in discriminatory and predatory lending practices.”
“Participate in the way you feel comfortable,” the organization says. “This may include participating in NACA’s aggressive advocacy campaigns, volunteering at an event, increasing participation in NACA’s programs, encouraging others to register to vote through NACA’s website, or other activities.”
How long does the process take?
The NACA qualification process takes time. Previously, this program resulted in a slower loan process where it took longer for borrowers to get to the point where they actually closed on the loan.
“That was a problem for us,” Marks admitted.
In a competitive market, this can be a serious issue where a seller may choose another buyer who can close faster. However, NACA insists that this is a thing of the past and that it is now a streamlined process.
“If you come in and say, ‘I have the property,’ we can get you closing in less than 30 days…usually about 24 days,” Marks said of how the process works.
A major lender confirmed that some loan closings for NACA mortgages tend to have shorter processing times due to NACA process changes.
And Marks says NACA plans to demonstrate in August how streamlined its qualification process has become.
“So what we’re going to do across the country – and in Texas – in Dallas, in Austin, in Houston… we’re going to do these events that we call Achieve the Dream events,” he said. “In one day, someone will come in and do all four steps. So they’ll do a home buyer workshop.
https://www.wfaa.com/article/money/business/right-on-the-money/can-you-really-get-mortgage-below-market-rate-with-no-money-down-closing-costs-credit-score-requirement/287-f3d5b995-5580-4c6a-98f4-293fe09709ca
